Recently widowed Mother-in-law w/ debt problems / upside down car loan she can't pay

[berryberry61]

My mother-in-law in PA has several debt problems and I need some advice. Her husband had been in the VA hospital and veterans nursing home the past 2 1/2 years. he recently passed away 2 weeks ago

She rents - doesn't own a home nor has any savings / pension / etc. Only income is Social security

She has several thousand in credit card debt.

She also in 2006 purchased a new PT cruiser (against my / my wife's advice) with nothing down and is upside down on the loan (roughly $14K owed - car is likely worth about $11K max).

Now that her husband has passed away, she can no longer afford to pay the car payments each month, plus because she has paid the minimum on the credit card debt (again - against my advice) she still owes a lot on that she can't afford to pay

Since she ignored our advice previously (including the year when we paid for the hursing home and told her to focus on paying down her debt and sell her car and not buy a new one) - we are not in a position to help her finacially again

Advice?

How much would it cost for her to file bankruptcy?

Could I, on her behalf contact the credit card / car loan companies and explain the situation, see if interest can be waived, etc?

or should I just tell the car loan company to come and pick up the car (voluntary repo) and tell them tough luck - she has no assets or income, you should have never loaned her the money to begin with - eat the cost. If we did that, what could they do (other than harass her - and how could we prevent them from harassing her?)

Thanks

[draygnmage]

Without her permission you can't even talk to her creditors.

Once she falls behind on the car, they'll repo themselves, voluntary or not, its all the same on a CBR.

She's basically judgment proof. Yes, they will continue to contact her and try to get her to pay her obligations, but they can't garnish SSI, and they can't keep SSI money they get from an attached bank account. If she owns no property they can't get a lien against her. The best they can hope for is to get their judgments and keep the judgments alive till she passes away and pray for something to come up in probate.

Cease and desist letters will stop the CA's from calling, but you'll have to send the letter again every time the debt changes agencies.

Save yourself the headache and let the car loan go naturally, it might kill her credit enough to keep her from getting any new cards or lines.

[berryberry61]

Thanks for the advice. Actually I will have permission from her to contact the creditors (at least thats the plan)

What I was thinking of doing is putting together a letter, showing her income (just social security), itemizing her expenses (rent, food, utilities, medical) and showing noting has no assets, etc. I was then thinking of offfering the credit card companies two choices.

1. Agree to waive all interest / late fees - and she will pay $xx a month on thr principal till the principal is paid

2. If they don't agree to A, then saying fine - she will just stop payment and default

I doubt she could afford more than $25/month on each of the 2 credit cards she holds - but that may give her some peace of mind and stop collection calls

Would the credit card companies go for that and agree in writing to wiave interest and late fees?

As to the car - I could try something similiar or just tell them to repo it and forget about it

Thoughts?
Thanks

[draygnmage]

No credit card company is going to waive the interest and/or late fees. Even if she only owed 500 on each card, 25/mo is nearly 2 years of payments (more like 5-10 with interest). You can offer it, but I seriously doubt it will stop the calls. They'll want their money and they're entitled to call her to collect it. Look at it this way... Your mother is entitled to SSI. If they told her they just couldn't afford to give it to her and only wanted to pay her 25.00 a month, you'd be a little upset. You'd be calling SSI every day asking where the rest of her money is and wouldn't take "we just don't have it" for an answer.

[berryberry61]

Thanks. yes, this is a perplexing problem for me. In my job, I send people to the collection agency when they don't pay up. And I believe in taking responsibility for your actions

Alas, in her situation, the money just ain't there. I reviewed her finances over the weekend. The money she gets in from her and her deceased spouse's SS will only be enough to pay for her bare necessities of living - rent, food, utilities, medical, etc.

So I presented her the options and put together 3 letters to go out to her car loan bank, and two credit card companies telling them she can't pay the debt, has no assets nor garnishable income, etc

The thing that pisses me off on the car loan is she was clueless when she bought it a year ago and the lender and dealer really took advantage of her. Sold her the car for full sticker, gave her a 7 year loan at 10.10% interest and had her take out gap insurance because they knew the loan would be upside down for the first 4 years. Yea, she signed it and should have knew better - but this is a 72 year old woman who never had to deal with this type of stuff - so they put one over on her. So I guess I don't feel that guilty telling her to tell the bank to repo the car and walk away from the loan. She will just have to deal with the phone calls. And we will send cease and desist letters as needed

[draygnmage]

It's probably for the best.

Not to nitpick, but she was informed. You and your wife TOLD her not to buy the car. Some people will decide to make bad decisions no matter who tries to stop them.